US stock indexes inch back from record highs as calm reigns

Analysts said traders are anticipating that the euro will rise above a technical barrier of $1.10 against the dollar if, as expected, centrist Emmanuel Macron defeats anti-EU candidate Marine Le Pen in Sunday's French election, and were remaining bullish on the euro for that reason.

"The euro is a sell on rallies above 1.10 against the dollar as the ECB's senior leadership under Draghi and Praet remain cautious about the outlook for euro-zone inflation, while U.S. payrolls suggests the Fed will continue to hike rates", says Mansoor Mohi-uddin, a Singapore-based strategist at NatWest Markets, a unit of Royal Bank of Scotland.

It was a similar story in euro zone government debt markets: the premium investors demand to hold French rather than German benchmark 10-year bonds touched its tightest in six months as markets opened on Monday, but then gave back some of that. Markets had been rallying for weeks in anticipation of a victory by Emmanuel Macron, and analysts said that left little upside for when the result actually occurred. Wall Street looked set to open modestly lower as index futures, including those on the S&P 500, which earlier hit a record high, reversed direction and fell.

That said, world stocks, as measured by MSCI's 46-country world index held close to a record high as the main measure of Asia-Pacific shares, excluding Japan, rose 0.8%.

The broader dollar index traded less than 0.1 per cent on the day after hitting a two-week high of 99.462. But Coach rose $2.61, or 6.1 percent, to $45.27.

The common currency rose to its highest since November 9 as traders focused on the French presidential race. The dollar edged up to 112.75 Japanese yen from 112.61 yen.

But by midmorning in NY, the euro fell 0.5 percent to $1.0944 against the dollar, and 0.4 percent versus the yen to 123.45 yen.

The dollar surged against a number of major currencies on Thursday after the U.S. Federal Reserve played down any threats to this year's planned rises in interest rates, solidifying expectations of another move in June.

The French election overshadowed Friday's U.S.jobs report, which showed that the economy added 211,000 jobs last month, beating expectations for a gain of 185,000 and the unemployment rate ticked down to 4.4%, a near a 10-year low.

The gap between yields in Germany and Italy, which faces an election before May 2018, stood at 180 bps. Australia's S&P/ASX 200 gained 0.6% to 5,870.90 and Hong Kong's Hang Seng gained 0.3% to 24,547.98.

"We've had a pretty strong bounce the last month or so", he said.

Oil prices, which hit nearly six-month lows last week on worries about a global glut of crude, edged up on prospects of output cuts agreed by the OPEC producers group and others could be extended. Brent crude, the global standard, rose 27 cents to $49.37 per barrel. Euro/dollar last traded at $1.0965.